(Adds comment from Alberta Energy Regulator)
CALGARY, Alberta, April 24 A Canadian court on
Monday upheld a decision to grant lenders priority over
environmental clean-up costs in oil-and-gas bankruptcies,
raising chances more disused wells from defunct companies could
become a government responsibility.
That could further strain the government-run,
industry-funded Orphan Well Association (OWA), which cleans up
wells for which no party is legally responsible. The group has
said it needs extra funding and upping levies for producers is
Last year, a court in Canada's oil heartland of Alberta
ruled that proceeds from the sale of assets belonging to
privately held Redwater Energy Corp would go first to secured
creditors, rather than toward cleaning up the company's inactive
oil and gas wells.
The OWA and its parent, the Alberta Energy Regulator (AER),
had appealed that decision.
Alberta's Court of Appeal on Monday ruled 2-1 against them,
saying the previous decision contained no errors.
The AER said in a statement it is disappointed at the
decision and is studying it to determine whether to appeal
The number of so-called orphan wells in Canada spiked after
the 2014 oil price crash as layoffs swept the oil patch and
companies went bankrupt. Alberta, which produces about 80
percent of Canada's crude, had more than 1,500 orphan wells in
February, up from 26 in 2012.
This year's federal budget allocated C$30 million to Alberta
to stimulate economic activity and employment in the resource
sector, which Premier Rachel Notley said would be used to clean
up orphan wells.
(Reporting by Ethan Lou in Calgary, Alberta; Editing by Andrew